Daiwa Securities has raised over $420m for a product based on a Credit Suisse call overwriting strategy, SRP has learned.
The three-year Strategic Asia share fund was structured by the Swiss bank and managed by Daiwa SB Investments and was sold in December last year, although the bank said it has also sold a number of similar private deals this year for institutional clients. The product, which is not capital protected, targets total growth of 30% and will knock out if that performance is achieved before maturity.
The underlying CS Asia Equity Income Plus fund (class A) is based on a basket of shares, currently 61, selected by Daiwa SBI and with a call-overwriting strategy operated by Credit Suisse.
Each quarter the bank aims to generate a coupon with around a 3% (12% pa) premium to interest rates by selling out the money calls. Current option pricing means that the three-month calls sold to meet the target yield generally strike at around 107%, although this could vary with interest rates and volatility, explained Min Park, Credit Suisse's head of equity derivative sales for Asia.
"We expect this kind of deal to become more popular again this year as equities recover," said Park, who added that although such products had been popular three or four years ago, Japanese investors had been using alternative assets in light of poor equity performance in recent years.
This product also appears on the Japan database.